Your Home and Bankruptcy
If you have made the decision to declare bankruptcy or have already begun your bankruptcy proceedings, one thing that you may be worrying about is what will happen to your home in the event that your bankruptcy is made official. This guide will explain everything that you need to know about what will happen to your property in the event of being declared bankrupt.
When you declare bankruptcy you will be allocated a trustee who will preside over any dealings that you have relating to your property. This trustee can decide to place your house up for sale if they deem it to be the only real way that you can make any substantial payments back to your creditors. If this is the case, you may be compelled to give up your equity in any home ownership that you may have - this means the amount of the house that you would own once you have paid back your entire mortgage in full. You may also be forced to hand over your legal sovereignty over your house.
Your beneficial interest and sovereignty of your house will be transferred to your trustee for the period of your bankruptcy, if you are the only owner of your house. The reason that this is done is to prevent you from selling your house yourself and taking some of the cash from the sale for yourself.
Once sovereignty over your property has been passed on to your trustee, your property's status on the Land Registry will be changed. A Bankruptcy Restriction Notice will be noted down on your houses file so that your circumstances are clear to anybody who may view it.
Even if you only have part ownership of the property that you currently live in, your stake of beneficial interest will be passed to your trustee. If this is the case, then your property will have its status changed on the Land Registry to show "Form Restriction J".
If you are in this position you will still be at risk of your property being sold due to the fact that your trustee can take on ownership of your beneficial interest with a court order. Your trustee will also be notified of any changes or activity related to your property so that you are unable to sell it without the courts being notified.
Stopping Your House Being Sold
It is unlikely that you will be able to halt the sale of your home altogether but there are ways in which you will be able to slow it down. You may be able to do this if your beneficial interest does not have a value of more than £1,000. You can also attempt to sell your beneficial interest to a related party of some sort - your partner for example. You can display to the court that you need additional time to secure a new place to live for your children or partner - if this is the case, you can temporarily halt the sale of your house for up to a year.
Living As A Tenant In A Rented Property
If it is the case that you are currently renting the place that you are living in, you may not be affected by the fact that you have gone bankrupt. You will only be required to vacate the premises if you have fallen behind on your rent payments or if you have a contract that states explicitly that you have to leave if you declare bankruptcy.